To cut, or not to cut?

With the budget coming out soon, the media has been debating furiously over what should and shouldn’t be in it. Leaks from government have pointed towards cutting the 50p rate of tax back to 40p. For the government, this is political suicide; at a time of harsh austerity when the rich keep getting richer to give them a tax break would be extremely unpopular. To the public this would be extremely unfair and prove the government’s favourite phrase, “We’re all in this together” to be a lie.

Personally I’m on the fence with this issue, according to the government around 308,000 people are in the 50p band, when Labour first introduced the 50p rate they said it would bring in £2-6 billion annually but the government refutes this claim. The government claims that because of the higher tax rate, people will move their money abroad to tax havens. This is doubly bad for treasury incomes as not only are people not paying the extra tax, but because all their income gets moved overseas then the treasury loses all the money that the wealthy were paying before the tax rise. Since I don’t know the figures I can’t give a clear response to this issue, I do not have the ideological attachment to tax that the three major parties have (Labour and Lib Dems with high tax and Conservatives with low tax), I simply believe that the purpose of tax is to bring in the most money possible for the government. If lowering the maximum rate of tax from 50p to 40p brings in more money (as rich people decide to pay their taxes here instead of abroad) then I would support it, if it lowers the amount of money received by the treasury then I would oppose it.

This is a dangerous move for the government; if it fails then it will be politically disastrous for the coalition and even if it succeeds it will be extremely difficult to prove so, and rather than being beneficial for the government it just won’t be disastrous due to the apparent unfairness of the scheme.